When the rich tiptoe in the world of crypto

This is partly because none of the other asset classes can claim the type of returns offered by blue-chip crypto assets such as Bitcoin and ether. The world’s largest cryptocurrency, bitcoin, has gained over 50% since the start of the year. One year profit is around 400%.

Indian crypto exchanges have a very high client base as a result of the advantage in such assets as compared to stockbrokers. Zerodha today has over seven million users, while CoinSwitch Kuber has 11 million and WazirX has 8.3 million.

While the increase in the customer base in Indian crypto exchanges has been driven by retail investors, there has also been an increase in interest among HNI investors to invest in cryptocurrencies over the past 12 months.

“HNIs or the affluent class joined the crypto bandwagon a little late because they found it to be a very relevant asset class. Not having crypto means you are ignoring a 10 year old google or apple. Some investors in crypto As an alternative to gold,” Ashish Chanda, Founder and CEO, Crystal.AI, a global wealth management firm with assets under management (AUM) of $360 million and including HNI clients in 22 countries, said. said. India.

According to Chanda, affluent investors prefer to invest through the fund, as they do not want to take the regulatory risk of owning crypto directly. “Moreover, it is more convenient as HNI investors do not need to convert their fiat currency to crypto or open wallet accounts with crypto exchanges,” Chanda said.

Since there are no US-listed exchange-traded funds (ETFs) in the market, investors are putting money in ETFs listed in other countries.

For example, Ether Tracker One and Bitcoin Tracker One, the two top-performing ETFs on the Crystal platform, are listed in Sweden.

The global wealth management firm also has an in-house fund, Crystal Founder’s Fund, which has $30 million in assets, 6% of which is in crypto. According to Crystal.AI, one in three of its clients are open to investing in crypto.

While fund managers have begun to seriously consider getting crypto exposure in their portfolios, even exchanges are planning to offer investment services through the fund route.

Mudrex, a global algorithm-based crypto investment platform, is in the process of launching coin sets, which will allow investors to simultaneously invest in curated baskets of cryptos.

For HNI clients, it plans to come up with a crypto-focused fund.

“HNIs are primarily looking to diversify their portfolio across asset classes. Edul Patel, CEO and co-founder of Mudrex, said, he has investments in gold, fixed income instruments, equities, alternative investment funds, etc. They are constantly adding crypto to their portfolio to capture the alpha-generating potential of crypto. .

In India, so far, HNIs, family offices and the affluent have been slow to adopt cryptocurrencies, as regulatory ambiguity and low familiarity have affected participation.

According to Vaibhav Porwal, co-founder, Deserve, a money-tech firm, most investors are participating in a small way.

“These investors are looking to test the waters before putting in serious money. Where the next generation takes over the portfolio, there appears to be a slight divergence with clients. They are more receptive to the idea of ​​investing in crypto,” said Porwal, who is awaiting clarity from regulators before taking a final call on investment offers through the fund for crypto investments.

Whether HNIs invest directly in coins or take the fund route, Porwal believes it is a mixed bag. “Investors with domestic capital invest directly in cryptocurrencies, and investors using LRS limits choose a mix of direct and fund-based investments,” he said.

Under the Liberalized Remittance Scheme (LRS) of the Reserve Bank of India (RBI), an Indian individual can remit up to $250,000 per year for travel, education and medical care as well as for the purchase of shares.

In India, crypto-focused fund services have not picked up so far as there is a gray area mainly in terms of taxation on cryptocurrency funds.

However, according to Patel of Mudrex, this trend is changing rapidly.

“Companies in India are setting up crypto-based funds whose legal jurisdiction is outside India,” he added.

According to Patel, the minimum ticket size for HNIs across the industry is $100,000, while the crypto allocation remains within 4-7% of investors’ entire portfolios.

Furthermore, according to the latest report by accounting and consulting firm PricewaterhouseCoopers (PwC), the total AUM of crypto hedge funds globally increased from $2 billion in 2019 to around $3.8 billion in 2020.

However, the pace of adoption in India is slow. “We are not advising our customers to get into crypto right now because it is too risky in terms of regulations in India. It is not yet known in what form the government bill will come. Also, taxation of crypto. But there is ambiguity,” said Amit Kumar Gupta, New Delhi-based portfolio manager at Adroit Financial Services Pvt Ltd, a SEBI-registered portfolio management firm.

Experts say that retail investors should not follow the investment strategy of HNIs as they have high risk appetite.

Furthermore, retail investors should stay away from crypto as it is a highly risky asset class, whereas crypto investments looking to join should account for 2-5% of one’s portfolio.